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Description

Description

“The UK mortgage sector experienced a difficult 2019, but those challenges are dwarfed by the threat posed by COVID-19 to the economy and, in turn, the housing market in 2020. The crisis will affect consumers for years to come, both financially and emotionally. People will yearn for reassurance and certainty, shining a light on mortgage product features. In particular, it will highlight the importance of products’ flexibility, and the options available to borrowers if their circumstances change.”
– Irene Salazar, Senior Financial Services Analyst – 9th April 2020

This Report will cover the following areas:

  • The impact of COVID-19 on market performance and dynamics in the mortgage sector.
  • How COVID-19 will impact consumer behaviour and mortgage preferences.
  • Analysis of competitive strategies and innovation.
  • Mortgage ownership among consumers, their mortgage-related plans, channel preferences, and their interest in key product features.

What's included

What's included

Table of contents

Table of contents

  1. Overview

    • What you need to know
      • Key issues covered in this Report
        • Products covered in this Report
        • Executive Summary

            • The market
              • Gross lending fell in 2019
                • Figure 1: Gross mortgage lending, 2015-19
              • Significant contraction expected in 2020, followed by a return to growth
                • Figure 2: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
              • Before COVID-19, housing market was poised for a rebound in 2020
                • Figure 3: Annual change in average UK house prices – ONS and Nationwide house price indices, January 2010-December 2019
              • Interest rates to remain low, with effect of emergency measures still to be seen
                • FCA releases mortgage prisoners
                  • Impact of COVID-19 on the mortgage market
                    • Figure 4: Expected impact of COVID-19 on mortgages, short, medium and long-term, 30 April 2020
                  • Companies and Brands
                    • Top 10 lenders dominate the market
                      • Figure 5: Top 10 UK mortgage providers, by outstanding mortgage balances at year-end, 2019
                    • Tesco Bank and Sainsbury’s Bank exit mortgage market
                      • LBG and Santander target FTBs
                        • Nationwide to prioritise later-life mortgages
                          • HSBC targets growth in market share
                            • Lenders to compete on ‘green mortgages’
                              • The consumer
                                • 27% of adults have a mortgage
                                  • Figure 6: Current housing situation, February 2020
                                • 61% of borrowers have a fixed-rate loan
                                  • Figure 7: Type of mortgage held, February 2020
                                • Quarter of existing deals arranged within the last 12 months
                                  • Figure 8: Timing of last mortgage purchase, February 2020
                                • A quarter of adults expects some mortgage activity within a year
                                  • Figure 9: New mortgage plans, February 2020
                                • 70% interested in fixed-rate deals
                                  • Figure 10: Future mortgage-type preferences, February 2020
                                • Five-year fixed deals hold the most appeal
                                  • Figure 11: Preferred length of fixed-term deal, February 2020
                                • People prefer to separate legs of their customer journey by channel
                                  • Figure 12: Channel preference, February 2020
                                • A majority are interested in overpaying
                                  • Figure 13: Interest in mortgage features, February 2020
                                • What we think
                                • The Impact of COVID-19 on Mortgages

                                  • Short, medium and long-term impact on the market
                                    • Figure 14: Expected impact of COVID-19 on mortgages, short, medium and long-term, 30 April 2020
                                  • Opportunities and Threats
                                    • Lockdown restrictions temporarily halt the market
                                      • Market to depend on remortgaging activity as home-purchase is put on hold
                                        • Competition will increase in some sectors of the market
                                          • FinTechs will face funding difficulties
                                            • Lenders brace for growing arrears and bad debts…
                                              • …delaying impact of emergency measures
                                                • Impact on the market
                                                  • A significant contraction in lending in 2020 before a return to growth in 2021
                                                    • Further government intervention anticipated to boost housing market activity
                                                      • Figure 15: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
                                                      • Figure 16: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
                                                    • Shifts in consumer behaviour
                                                      • Household finances were in good shape prior to COVID-19
                                                        • Figure 17: The financial well-being index, April 2015-April 2020
                                                      • Confidence will take time to recover
                                                        • Figure 18: The financial confidence index, April 2015-April 2020
                                                      • Impact on key consumer segments
                                                        • People with mortgage commitments more likely to be worried about the impact of COVID-19
                                                          • Higher incomes groups are worried, but some will receive a financial boost
                                                            • Uncertainty is likely to hit renters’ plans
                                                              • First time buyers will be hit hard by tighter lending criteria…
                                                                • …which could prompt further state intervention
                                                                  • How a COVID-19 recession will reshape the market
                                                                    • Rising unemployment with hamper market in the medium term
                                                                      • A different type of recession for lenders…
                                                                        • …and a different response from the government
                                                                          • Low interest rates will help to support lending
                                                                            • Impact on the Marketing Mix
                                                                              • Marketing to focus on supporting customers
                                                                                • Online channels will move to the fore
                                                                                  • …but opportunities remain for personalised service
                                                                                    • Consumers to shop around for the best deals…
                                                                                      • …with a renewed regulatory focus on mortgage switching
                                                                                        • Government intervention brings payment holidays into focus
                                                                                          • Fixed deals vs variable rates
                                                                                            • COVID-19: Market context
                                                                                            • Issues and Insights

                                                                                              • COVID-19 delays rebound of mortgage market
                                                                                                • The facts
                                                                                                  • The implications
                                                                                                    • People will yearn for stability and reassurance, while providers will look to differentiate themselves
                                                                                                      • The facts
                                                                                                        • The implications
                                                                                                        • The Market – What You Need to Know

                                                                                                          • Gross lending fell in 2019
                                                                                                            • Volume of new mortgages declined by 4.3% in 2019
                                                                                                              • Share of intermediated mortgages continues to grow
                                                                                                                • Before COVID-19, housing market was poised for rebound in 2020
                                                                                                                  • FCA releases mortgage prisoners
                                                                                                                  • Market Size and Forecast

                                                                                                                    • Gross lending fell in 2019
                                                                                                                      • Figure 19: Gross mortgage lending, 2015-19
                                                                                                                    • COVID-19 – market forecast
                                                                                                                      • Significant contraction is expected in 2020, followed by a return to growth.
                                                                                                                        • Figure 20: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
                                                                                                                        • Figure 21: Forecast of gross mortgage lending (adjusted for COVID-19), 2014-24
                                                                                                                      • Pre-COVID-19 forecast: market was to return to steady growth
                                                                                                                        • Figure 22: Forecast of gross mortgage lending, 2014-24
                                                                                                                        • Figure 23: Forecast of gross mortgage lending, at current and constant prices, 2014-24
                                                                                                                      • Forecast methodology
                                                                                                                      • Market Segmentation

                                                                                                                        • Volume of new mortgages declined by 4.3% in 2019
                                                                                                                          • Figure 24: Volume of new mortgages, by purpose, 2015-19
                                                                                                                        • Value of new mortgages fell by 2.3% in 2019
                                                                                                                          • Figure 25: Volume of new mortgages, by purpose, 2015-19
                                                                                                                      • Channels to Market

                                                                                                                        • Share of intermediated mortgages continues to grow
                                                                                                                          • Figure 26: Distribution of regulated mortgage sales, direct versus intermediated, 2014-19 H1
                                                                                                                        • Virtually all sales are advised
                                                                                                                          • Figure 27: Distribution of regulated mortgage sales, advised versus non-advised, 2014-19 H1
                                                                                                                      • Market Drivers

                                                                                                                        • House prices were starting to pick up
                                                                                                                          • Figure 28: Annual change in average UK house prices – ONS and Nationwide house-price indices, January 2010-December 2019
                                                                                                                        • Interest rates to remain low…
                                                                                                                          • …but impact of emergency measures may take time to materialise
                                                                                                                            • Figure 29: Interest rates for selected mortgages at 75% LTV and SVR, January 2014-February 2020
                                                                                                                          • Rates reflect competitive market for higher-LTV borrowers
                                                                                                                            • Figure 30: Interest rates for two-year and five-year fixed-rate mortgages at 95% LTV, January 2014-February 2020
                                                                                                                          • New building activity slows down
                                                                                                                            • Figure 31: Number of permanent dwellings started and completed, 2008/09-2018/19
                                                                                                                        • Regulatory and Legislative Changes

                                                                                                                          • COVID-19: FCA sets out guidance for lenders
                                                                                                                            • FCA modifies advice rules to encourage consumer choice
                                                                                                                              • Loyalty penalty continues to be reviewed
                                                                                                                                • FCA releases mortgage prisoners
                                                                                                                                  • End of Help to Buy ISA to encourage FTBs to find alternatives
                                                                                                                                  • Companies and Brands – What You Need to Know

                                                                                                                                    • Top 10 lenders dominate the market
                                                                                                                                      • Tesco Bank and Sainsbury’s Bank exit mortgage market
                                                                                                                                        • LBG and Santander target FTBs
                                                                                                                                          • Nationwide to prioritise later-life mortgages
                                                                                                                                            • HSBC targets growth in market share
                                                                                                                                              • Lenders to compete on green mortgages
                                                                                                                                                • TV is the main channel for advertising mortgages
                                                                                                                                                • Market Share

                                                                                                                                                  • Top 10 dominate the market
                                                                                                                                                    • LBG remains the largest lender
                                                                                                                                                      • HSBC share expected to grow
                                                                                                                                                        • Figure 32: Top 10 UK mortgage providers, by outstanding mortgage balances at year-end, 2018-19
                                                                                                                                                    • Competitive Strategies

                                                                                                                                                      • COVID-19: Lenders temporarily withdraw mortgage products
                                                                                                                                                        • Tesco Bank and Sainsbury’s Bank exit mortgage market
                                                                                                                                                          • LBG targets FTB with little or no savings
                                                                                                                                                            • Nationwide to prioritise later-life mortgages
                                                                                                                                                              • Santander looks to attract FTBs
                                                                                                                                                                • RBS Group and Barclays focus on transforming the mortgage journey
                                                                                                                                                                  • HSBC targets growth in market share
                                                                                                                                                                    • Virgin Money Group prioritises margins over volumes
                                                                                                                                                                    • Launch Activity and Innovation

                                                                                                                                                                      • Lenders to compete on green mortgages
                                                                                                                                                                        • Newcastle Building Society launches LISA Mortgages
                                                                                                                                                                          • Nationwide and Starling Bank partner with CreditLadder
                                                                                                                                                                            • Habito introduces Habito Go
                                                                                                                                                                              • Lenders experiment again with 15-year fixed-rate deals
                                                                                                                                                                              • Advertising and Marketing Activity

                                                                                                                                                                                • Above-the-line adspend jumps in 2019-20…
                                                                                                                                                                                  • Figure 33: Total above-the-line, online display and direct mail advertising expenditure on mortgages, 2015/16-2019/20
                                                                                                                                                                                • TV is the main channel for advertising mortgages
                                                                                                                                                                                  • Figure 34: Total above-the-line, online display and direct mail advertising expenditure on mortgages, by media type, 2019-20
                                                                                                                                                                                • Top 10 advertisers account for 95% of ATL adspend
                                                                                                                                                                                  • Figure 35: Top 10 advertisers of above-the-line, online display and direct mail advertising expenditure on mortgages, 2017/18- 2019/20
                                                                                                                                                                                • Halifax is the biggest ATL advertiser
                                                                                                                                                                                  • Nationwide to heavily promote later-life mortgages
                                                                                                                                                                                    • Santander launches new campaign featuring Ant and Dec
                                                                                                                                                                                      • Habito pushes boundaries with Mortgage Kama Sutra campaign
                                                                                                                                                                                        • Figure 36: Habito’s Mortgage Kama Sutra campaign, November 2019
                                                                                                                                                                                      • Nielsen Ad Intel coverage
                                                                                                                                                                                      • The Consumer – What You Need to Know

                                                                                                                                                                                        • 27% of adults have a mortgage
                                                                                                                                                                                          • 61% of borrowers have a fixed-rate loan
                                                                                                                                                                                            • Quarter of existing deals arranged within the last 12 months
                                                                                                                                                                                              • A quarter of adults expects some mortgage activity within a year
                                                                                                                                                                                                • People prefer to separate legs of their customer journey by channel
                                                                                                                                                                                                  • A majority are interested in overpaying
                                                                                                                                                                                                  • Mortgage Ownership

                                                                                                                                                                                                    • 27% of adults have a mortgage
                                                                                                                                                                                                      • Figure 37: Current housing situation, February 2020
                                                                                                                                                                                                    • 71% of mortgage owners are at risk of disruptions in their income
                                                                                                                                                                                                      • Figure 38: Financial situation of mortgage owners, February 2020
                                                                                                                                                                                                  • Type of Mortgage Held

                                                                                                                                                                                                    • 61% of borrowers have a fixed-rate loan
                                                                                                                                                                                                      • Figure 39: Type of mortgage held, February 2020
                                                                                                                                                                                                    • Emergency rate cuts could see more default to SVR
                                                                                                                                                                                                      • Figure 40: Type of mortgage held, by age, February 2020
                                                                                                                                                                                                  • Timing of Last Mortgage Purchase

                                                                                                                                                                                                    • Quarter of mortgage holders arranged a deal within the last 12 months
                                                                                                                                                                                                      • Figure 41: Timing of last mortgage purchase, February 2020
                                                                                                                                                                                                    • 44% of over-45s have held current deal for 5+ years
                                                                                                                                                                                                      • Figure 42: Timing of last mortgage purchase, by age, February 2020
                                                                                                                                                                                                    • 61% of borrowers on SVR for longer than five years
                                                                                                                                                                                                      • Figure 43: Timing of last mortgage, by type of mortgage held, February 2020
                                                                                                                                                                                                  • Future Mortgage Intentions

                                                                                                                                                                                                    • A quarter of adults expects some mortgage activity within a year
                                                                                                                                                                                                      • 21% of mortgage holders expect to remortgage within a year
                                                                                                                                                                                                        • Figure 44: New mortgage plans, February 2020
                                                                                                                                                                                                      • 70% interested in fixed-rate deals
                                                                                                                                                                                                        • Figure 45: Future mortgage type preferences, February 2020
                                                                                                                                                                                                      • Five-year fixed deals hold the most appeal.
                                                                                                                                                                                                        • Figure 46: Preferred length of fixed-term deal, February 2020
                                                                                                                                                                                                    • Channel Preference

                                                                                                                                                                                                      • People prefer to separate legs of their customer journey by channel
                                                                                                                                                                                                        • COVID-19: opportunity to capitalise on changing consumer habits
                                                                                                                                                                                                          • Figure 47: Channel preference, February 2020
                                                                                                                                                                                                      • Interest in Mortgage Features

                                                                                                                                                                                                        • A majority are interested in overpaying
                                                                                                                                                                                                          • As deals become longer, flexibility is key
                                                                                                                                                                                                            • Terms of payment holidays will receive more attention post COVID-19
                                                                                                                                                                                                              • Figure 48: Interest in mortgage features, February 2020
                                                                                                                                                                                                            • TURF analysis: a combination of simple features can appeal to 90% of potential customers
                                                                                                                                                                                                              • Figure 49: Interest in mortgage features, TURF Analysis, February 2020
                                                                                                                                                                                                            • People on higher incomes with fixed-rate deals are more interested in overpaying
                                                                                                                                                                                                              • Figure 50: Interest in mortgage overpayment feature – CHAID – Tree output, February 2020
                                                                                                                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                              • Abbreviations
                                                                                                                                                                                                                • Consumer research methodology
                                                                                                                                                                                                                  • CHAID analysis methodology
                                                                                                                                                                                                                    • Figure 51: Interest in mortgage features, CHAID analysis table output, February 2020
                                                                                                                                                                                                                  • TURF analysis methodology
                                                                                                                                                                                                                    • Figure 52: Interest in mortgage features – TURF analysis table output, February 2020
                                                                                                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                                                                                                    • Figure 53: Best- and worst-case forecast of gross mortgage lending (pre-COVID-19 forecast), 2019-24
                                                                                                                                                                                                                  • Forecast methodology

                                                                                                                                                                                                                  About the report

                                                                                                                                                                                                                  This report will give you a complete 360-degree view of your market. Not only is it rooted in robust proprietary and high-quality third-party data, but our industry experts put that data into context and you’ll quickly understand:

                                                                                                                                                                                                                  • The Consumer

                                                                                                                                                                                                                    What They Want. Why They Want It.

                                                                                                                                                                                                                  • The Competitors

                                                                                                                                                                                                                    Who’s Winning. How To Stay Ahead.

                                                                                                                                                                                                                  • The Market

                                                                                                                                                                                                                    Size, Segments, Shares And Forecasts: How It All Adds Up.

                                                                                                                                                                                                                  • The Innovations

                                                                                                                                                                                                                    New Ideas. New Products. New Potential.

                                                                                                                                                                                                                  • The Opportunities

                                                                                                                                                                                                                    Where The White Space Is. How To Make It Yours.

                                                                                                                                                                                                                  • The Trends

                                                                                                                                                                                                                    What’s Shaping Demand – Today And Tomorrow.

                                                                                                                                                                                                                  Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted.

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